Investing in agriculture is a good decision and could generate attractive financial returns. Even in an economic recession, people will continue to meet their need for food. Population growth, especially in urban areas, and improved incomes of the middle class support the growing demand for food.
In the African diaspora and African cities, many people have not received specific training in agriculture or agribusiness but wish to invest in the sector. This is a good trend that could improve the performance of the sector on the African continent. However, it is crucial to conduct a self-analysis to determine which type of investor (in agribusiness) you are. This will guide your choices and your investment strategy. In this article, we present four types of investors commonly encountered in the sector and suggest appropriate entry points for them.
They like farming! These investors sometimes come from a farm family and are passionate about the idea of germinating a seed or raising a few chickens themselves. They are not attracted by profit in agriculture but just want to farm and have a farm where they can go during the weekend or even live in their old age. This group of investors is turning to agriculture by passion for the land.
- Hire a specialist to determine the proper fit for the establishment of a leisure farm. You can start such project alone or with friends or relatives.
- Start a mini garden at home in order to have commonly used products such as market garden crops (carrots, tomatoes, peppers, etc.) or fish products. This passion could also support clean consumption!
Oriented by profit
These investors includes officials, entrepreneurs and other workers who have a surplus of income and want to invest it or decide to do better with their savings. There are two categories: the first consists of those who are not particularly interested in agriculture. We will not address this category as they are open to any type of investment that could grow their revenues. Investors in the second category by cons, for one reason or another, would like to direct their investments to the agricultural sector. The first question they should ask is: what payback time can I tolerate? The options we offer below depend on the answer to this question.
Return on investment in the short term
- Investing in agricultural production with a short cycle such as market garden crops and some livestock/fish
- Buying shares or acquiring an existing business in the field of agribusiness
- Investing in specific segments of the agricultural values chain that have potential for rapid return on investment such as transport, packaging, marketing of agricultural inputs, etc.
Return on investment in the long run
- All options mentioned above also apply to investments in the long term if the investor wants to operate on a large scale
- Investing in agricultural plantations (fruit, palm oil, etc.)
- Investing in the development of a food processing plant.
This type consists of investors who have the desire to support farming communities without an ambition to obtain a financial return. It consists of individuals but also companies who want to fulfil their social responsibility by supporting farming communities.
- Supporting agricultural enterprises or farm business ideas technically (your expertise) or financially (with start-up capital or expansion)
- Supporting producer groups or farmers
- Identifying and supporting organizations in the agricultural sector (NGOs, youth training centers in agriculture, etc.).
Holders of farmland
Although access to land is one of the main challenges of the agricultural sector, these investors are likely to have farmland that is not being exploited. If you are in this category and wish to promote this land, first define your investment objective. There is a good chance you joined one of the 3 categories of investors that we presented above (passion, profit or philanthropy). So follow the options of the respective type of investor.
This exercise of self-analysis will allow you to set your entry point into the agricultural sector and will help to define the investment strategies that are tailored to your needs and your profile.
We are happy to read in the comments (below) the results of your analysis and your views on the profile of investors in agribusiness.